Looking Back to 1930 For Inspiration Today

By Murray Forseter

There seems to be a persistent perception in many quarters that the retail industry is folding up its tent, that to survive, all manner of stores can ring the register only if goods are discounted at least 50% (pundits are touting 50% as the new 20% off), that store closings will turn malls into sarcophaguses, that an industry that thrives on creativity and service will capitulate despite a history of weathering storm after storm of economic distress.

For sure there is a grain of truth in some of what is being said and written. OK, more than just a grain. At least a sand trap’s worth of troubles. No retailer is immune to the tribulations of the national and global economies.

But it is equally true that some companies continue to thrive. December’s retail sales revealed some winners—Buckle, Aeropostale, BJ’s Wholesale Club, to name a few. And this month’s lead real estate article (see page 122 in the magazine or click here) features a variation on the power center format that is turning heads in Fort Collins, Colo.

Each month Chain Store Age surveys 60 different retailers, asking among other things, how many stores they intend to open over the next 12 months. During the October-December 2006 period, 43 of the 180 chains surveyed said they would not open any new stores. Two years later during the same three months, as the severity of the 2008 recession became clearer, just five more chains said they would not increase store count. Store construction is still happening for three out of four retailers. Attendees at this month’s annual SPECS conference presented by Chain Store Age also told us through their registration packets they would build thousands of new stores and remodel thousands of others this year.

Still, we cannot ignore reality. The pace of new and remodeled construction has slowed. Consumer confidence is way down. Unemployment is the highest in 16 years. Months, if not years, of depressing economic news lay ahead of us.

To put our current troubles into perspective, I turned to the pages of Chain Store Age from the early part of the Depression. Observe the similarities between today’s debacle after years of growth and that of November 1930, when Chain Store Age interviewed Hubert T. Parson, president of the F.W. Woolworth Co., then one of the largest retailers in the world.

CSA: What’s your opinion about the slump, Mr. Parson? Do you think if the depression had held off a year or two longer every chain would have made itself tight and shock-proof? Or would some of them have over-reached still further?

Parson: I think the second suggestion is probably more accurate. A year ago it was difficult to think that anything could ever stop chain stores and their progress. Some chains—and of course many firms in other lines of business as well—spread themselves too thin, giving insufficient regard to their finances and their organization. The slump was a serious thing for some of them, but a setback of some kind would have come sooner or later, anyway. It is always dangerous to expand too rapidly.

Based on improved sales beginning in September 1930, Parson went on to predict business had passed a “turning point” for the better. He was wrong, of course, but his reasoning as to why “chain store sales are an index to business conditions” is as true today as back then. “When retail buying picks up, the whole cycle of business [from manufacturer to wholesaler to jobber to retailer to consumer] improves.”